Jeffrey Katzenberg may soon begin looking for a new home for his Dreamworks Animation Co. Published trade and newspaper reports indicate that Paramount plans to develop its own animation studio and cap production costs at $100 million and that it no longer needs the kind of distribution deal it currently has with DWA, in which it receives 8 percent of the gross. The Los Angeles Times reported today (Thursday) that negotiations between DWA and Paramount have broken down, leaving Katzenberg with the alternative of finding a new distribution partner or selling the company. Those alternatives, the Times observed, are particularly difficult at this time since DWA's stock is trading at a two-year low and as other animation studios are competing with features produced well below DWA's traditional budgets. Investors are particularly leery of Katzenberg's apparent commitment to turn out five features every two years -- all in 3D. They point out that only 45 percent of ticket sales for the opening of Kung Fu Panda 2 came from 3D theaters. Interviewed by the Wall Street Journal at Allen & Co.'s media conference at Sun Valley, ID, Katzenberg scoffed at the reports of a possible split, noting that his pact with Paramount doesn't expire for another year. It's "a moment of opportunity for us," he said. As for Paramount's decision to launch its own animation studio, Katzenberg said, "Their going into the lower-end of the animation business isn't going to impact DreamWorks at all."

07/07/2011